Buyback, ‘Float Shrink’ ETFs Still Far Ahead in 2013

By Brendan Conway

There’s something about the handful of exchange-traded funds built around stock buybacks or overall sharecount reduction.

The easily overlooked TrimTabs Float Shrink ETF (TTFS) is harder to overlook after leaping 29% for the year through Wednesday. Compare to a 20% rise in the S&P 500 (SPY).

This ETF seeks out companies doing the best job of reducing the free float of their stock, adding in some screens for quality and against undue leverage. Holdings range from the famous (Starbucks, Apple) to the obscure (NeuStar, HollyFrontier).

PowerShares Buyback Achievers Portfolio (PKW), up 31% this year, has ballooned into a $1.5 billion ETF. Stocks in this one must have repurchased at least 5% or more of outstanding shares in the preceding year.

Have these funds tapped into a market inefficiency you should be exploiting? This year’s experience takes nothing away from the argument.

About Focus on Funds

As exchange-traded funds and other investing vehicles have ballooned in number, the task of figuring out what works well and what doesn’t has only gotten harder. Barrons.com’s Focus on Funds looks under the hood of ETFs, mutual funds and hedge funds for overlooked values, actionable ideas and the latest pitfalls for fund investors.

Chris Dieterich has covered the U.S. stock market for The Wall Street Journal and Dow Jones Newswires. He is a graduate of Regis University and the Missouri School of Journalism.